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Photograph: (Canva)
The government announced a Rs 1 lakh crore Urban Challenge Fund in the Union Budget 2025 presented on Saturday. The fund aims to support initiatives under the 'Cities as Growth Hubs' program, focusing on city redevelopment, water, and sanitation improvements.
Finance Minister Nirmala Sitharaman emphasised the government's commitment to urban transformation by launching the Urban Challenge Fund with a ₹1 lakh crore outlay. This initiative aims to revamp urban infrastructure, improve essential services, and make Indian cities more livable and economically dynamic.
What is the Urban Challenge Fund?
The Urban Challenge Fund is a government-backed initiative to support urban development projects in India. The fund will provide up to 25% of the cost of eligible projects, while the remaining 50% must be raised through bonds, bank loans, or public-private partnerships (PPPs). This approach encourages private and financial institutions’ involvement in city modernisation.
For the 2025-26 financial year, the government has allocated ₹10,000 crore under this fund to enhance urban infrastructure, ensuring sustainable and inclusive city growth.
Key announcements on urban development
Support for stalled housing projects
The Finance Minister provided relief for homebuyers affected by stalled housing projects. Under the SWAMIH (Special Window for Affordable and Mid-Income Housing) scheme, the government has completed 50,000 housing units and handed them over to buyers. An additional 40,000 homes will be completed in 2025, providing relief to middle-class families struggling with home loan EMIs and rent payments due to project delays.
To accelerate housing completion, the government announced SWAMIH Fund 2, with an allocation of ₹15,000 crore. This initiative is expected to complete an additional one lakh housing units, reducing the financial burden on homebuyers.
Expanded support for street vendors
The government is expanding the PM Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi) scheme to provide greater financial support to street vendors. The expansion includes:
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Higher bank loan limits
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UPI-linked credit cards with a ₹30,000 spending limit
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Training and skill development programs
So far, 68 lakh street vendors have benefitted from this scheme, which offers low-interest loans and protects them from high-interest borrowing from informal lenders. The expansion will empower small business owners and boost the informal economy.
The government has introduced a new socio-economic development scheme. This initiative will focus on skill development, job opportunities, and improved working conditions to enhance financial stability and quality of life for urban labourers.
The budget emphasised urban sector reforms to improve governance, municipal services, urban land use, and planning. The government plans to incentivise states and urban local bodies that implement these reforms effectively, enhancing city functionality and efficiency.
Another significant announcement was the launch of the National Geospatial Mission to develop foundational geospatial infrastructure and data. This mission, in coordination with PM Gati Shakti, will modernise land records, urban planning, and infrastructure projects. Geospatial technology will improve urban development decision-making and optimise resource allocation.
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